Two months after Americans elected Democrat Joe Biden president, his economic agenda — from bigger stimulus checks to higher taxes on the wealthy — just got a big shot in the arm.
This week voters in the state of Georgia went to the polls to settle runoffs for the state’s two Senate seats. Ultimately, Democrats captured both — giving them a slim majority of that chamber and with it, control of both houses of Congress and the White House for the first time since 2011.
The upshot is that Democrats could have an unexpected opportunity to pass a slew of new legislation that just weeks ago seemed like wishful thinking. Here’s what the Democratic sweep in Georgia means for your wallet:
More Stimulus Checks
After a lengthy standoff that ended in President Donald Trump begrudgingly signing $600 stimulus checks into law last week, legislators on both sides of the aisle demanded larger direct payments. The Democratic-controlled House passed a proposal that would have provided Americans with $2,000 checks, but the Senate refused to vote on it. (Senate Majority Leader Mitch McConnell, called the bill “socialism for rich people.”) Now, with Democrats holding the upper chamber as well, those bigger checks are a real possibility.
President-elect Joe Biden has promised as much, saying Monday that “if you send Jon [Ossoff] and the Rev. [Raphael Warnock] to Washington, those $2,000 checks will go out the door, restoring hope and decency and honor for so many people who are struggling right now.”
Higher Taxes for the Richest Americans
Biden campaigned on promises to improve the country’s healthcare, education and infrastructure, but to accomplish any of that, he needs money. Enter: Biden’s tax plan, which would raise roughly $4 trillion over a decade by increasing taxes on wealthy individuals and corporations.
Biden wants to raise the top corporate tax rate to 28% (President Trump cut this rate from 35% to 21% in 2017). For individuals, Biden plans to roll back reductions for individuals with incomes above $400,000. He’ll also impose the 12.4% Social Security payroll tax on earnings over $400,000.
The president-elect also wants to expand some tax credits for middle- and lower-income households, including temporarily increasing the Child Tax Credit to a maximum of $3,000, up from $2,000 for children between the ages of 6 and 18. There’d be an additional $600 (for a total of $3,600) for children under 6. He’d permanently expand the Child and Dependent Care Credit, which gives caregivers a credit to offset the cost of childcare.
What’s all this mean for you? The left-leaning Tax Policy Center says the majority of the tax hikes would be paid by the top 1% of earners. Meanwhile, the bottom 80% of taxpayers would see small tax cuts in 2022, worth between $540 and $760 in after-tax income, per TPC’s estimates.
Obamacare Gets a Boost
President-elect Biden has pledged to strengthen the Affordable Care Act (aka, Obamacare), and a Democratic-controlled Senate will make legislation to accomplish that easier.
That said, big changes — such as adding a government-run public option to the state health insurance marketplaces — are by no means a “slam dunk” under a narrow Democratic majority, says Linda J. Blumberg, an institute fellow at the Urban Institute. Perhaps a more likely move would be an expansion of premium subsidies that would make health insurance more affordable for consumers whose incomes exceed the current cut-off, and also for low-income consumers in states that haven’t expanded their Medicaid program, Blumberg says.
But before making these changes to the Affordable Care Act, Congress could help save its life: the law faces a serious threat before the U.S. Supreme Court, and lawmakers could vote on certain measures in an effort to void the plaintiff’s argument and get the case thrown out of court.
(Some) Student Debt Forgiveness
Despite prodding from progressives, Biden has said he’s unlikely to use executive powers to cancel some of the country’s more than $1.5 trillion in student loan debt. With Democratic control of Congress, he has a chance to get modest debt forgiveness approved via legislation, which seems to be his preference.
It’s still unclear how much debt cancellation might be approved or what sort of eligibility would be tied to forgiveness. Biden originally campaigned on plans to eliminate undergraduate debt for Americans who attended public colleges and historically Black colleges and universities (HBCUs). And in November, Biden said in a press conference that student debt relief was part of his economic plan and that it “should be done immediately.” At the time, he specifically highlighted a coronavirus relief bill that had passed the House of Representatives and included $10,000 of debt forgiveness to struggling private loan borrowers. (Previous versions of the same bill included forgiveness for federal and private borrowers.)
Help for First Time Homebuyers
As part of his $640 billion housing plan, President-elect Biden has proposed a first-time homebuyer tax credit of up to $15,000. He pitches it as a way to expand homeownership, particularly in communities of color.
The idea of offering a credit to help homebuyers isn’t entirely new. Biden’s plan builds off a temporary credit that was available during the Great Recession. From 2008 to 2010, a first-time buyer could receive up to $8,000 toward a down payment. What makes Biden’s plan different is that it would be permanent and “advancable,” meaning buyers could claim it at the time of purchase rather than waiting until they file their taxes.
The proposal is sure to appeal to house hunters, who say saving enough for a down payment is the biggest hurdle to buying a home. A $15,000 credit would provide about 4% of a median-priced home. Some industry experts, however, warn that the plan would boost demand, making it even harder to buy in today’s hyper-competitive and low-supply market.
Right now, housing is a bright spot in the pandemic economy, meaning the credit may not be the new administration’s first priority. When the plan does make it to Congress, Democratic control will make it much more viable.
“The Senate runoffs in Georgia in January act as the X factor,” said Ali Wolf, chief economist at Zonda Home, in an interview with Money last month.